Daytrading Outsourced to China

By some industry estimates, as many as 10,000 people in China are doing speculative day trading of American stocks â mostly aggressive young men working the wee hours here, from 9:30 p.m. to 4 a.m., each often trading tens of thousands of shares a day.

By some industry estimates, as many as 10,000 people in China are doing speculative day trading of American stocks â mostly aggressive young men working the wee hours here, from 9:30 p.m. to 4 a.m., each often trading tens of thousands of shares a day.

The article didn't say if the traders were hired with a salary (there was a mention of $1000) or if the traders paid a huge sum for training/education. The profit-sharing seems quite low at 10-50% for the traders, and the firm risks losing their capital through trading losses (although with tight risk management as in any prop firms). I wonder how these branch offices make money for their investors, unless these young traders they hired really could outperform most typical daytraders in the US. I was looking at the article for whether the traders actually had to pay for training before they started, similar to what many prop firms do here in US, hence the firms make money actually through education services. The traders themselves couldn't deposit yuan (e.g. for 20:1 leverage) to trade US-dollar stocks due to currency laws there, so they just trade the firm's capital.

The article didn't say if the traders were hired with a salary (there was a mention of $1000) or if the traders paid a huge sum for training/education. The profit-sharing seems quite low at 10-50% for the traders, and the firm risks losing their capital through trading losses (although with tight risk management as in any prop firms). I wonder how these branch offices make money for their investors, unless these young traders they hired really could outperform most typical daytraders in the US. I was looking at the article for whether the traders actually had to pay for training before they started, similar to what many prop firms do here in US, hence the firms make money actually through education services. The traders themselves couldn't deposit yuan (e.g. for 20:1 leverage) to trade US-dollar stocks due to currency laws there, so they just trade the firm's capital.

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This stuff is kinda old. "Prop" shops have been outsourcing to China, India and even places like Kazahstan for years. The margins are tight so it's near impossible to hire up and weed out profitable traders with 10-50% split (to the trader). But in those places, it's all good. So potential profits are much higher while the minimum benchmark numbers expected from traders are much lower.

Also, the weeding out is cheap due to low cost of living. In the US, there rarely is a draw and if there is one, it's poverty level and short term, which does not give enough time for the potential profitable trader to develop.

Finally, add in the fact that the fixed costs are LOW. It becomes an obvious common sense business move to do something like this. The game here is churning training fees and fighting for commissions of established, capitalized & profitable daytraders. Over there it's about creating profitable daytraders from scratch.

I think it's different to what most posters suggest... but then the article is 2-3 years behind the curve.

A few years back a proper prop firm (that pays salary, takes all downside risk but offers lower share of the profits) had a really good deal in India and China. The firm would hire as smart people as in the US or the UK, pay them way lower salary and see if any of them become adequately profitable. The idea is the fraction of people "naturally" attuned to the market is teh same in ever country... but the cost (on terms of salary to "failed" traders) is many times lower in India.

The trick is a number of day-trading approaches (that were common 3-4 years from now) have collapsed. Since, many good prop shops that aim to train the smartest of the aspiring traders have downsized.